EVIDENCE

Standing Committee on International Trade NUMBER 005 1st SESSION 43rd PARLIAMENT Tuesday, February 18, 2020 Le mardi 18 février 2020 Standing Committee on International Trade CANADA [Recorded by Electronic Apparatus] EVIDENCE February 18, 2020 Committee NUMBER 005 NUMBER 005 NUMÉRO 005 05 18 02 2020 2020/02/18 15:35:00 House Of Commons Comité permanent du commerce international Standing Committee on International Trade CIIT Chair The Honourable Judy A. Sgro 1 43

(1535) [ English ]

The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)) :

I call the meeting of the Standing Committee on International Trade to order. Pursuant to the order of reference of Thursday, February 6, 2020, we are continuing are study of Bill C-4 ,

an act to implement the agreement between Canada, the United States of America and the United Mexican States.

For witnesses in this segment we have, from the Canadian Agri-Food Trade Alliance, Brian Innes, vice-president, and Claire Citeau, the executive director; from the Canadian Cattlemen's Association, Bob Lowe, vice-president, and Fawn Jackson, manager, environment and sustainability; from the Canadian Labour Congress, Hassan Yussuff, president, and Chris Roberts, national director; and from the United Steelworkers, Ken Neumann, national director, and Mark Rowlinson, executive assistant to the national director. Welcome to all of you. Thank you for taking the time to appear before the committee today.

We will start with Ms. Citeau.

[ Translation ]

Ms. Claire Citeau (Executive Director, Canadian Agri-Food Trade Alliance) :

Thank you for inviting us to speak on behalf of the Canadian Agri-Food Trade Alliance, or CAFTA, the voice of Canadian agri-food exporters, regarding the Canada–United States–Mexico Agreement, or CUSMA. [ English ] Our members have a very simple message: CAFTA calls for the swift ratification of CUSMA to ensure continued stability in the North American market and strongly urges parliamentarians in both houses to pass Bill C-4 quickly.

CAFTA represents the 90% of farmers who depend on trade, and producers, manufacturers, and agri-food exporters who want to grow the economy through better and competitive access to international markets. This includes the beef, pork, meat, grain, cereal, pulse, soybean, canola, as well as the malt, sugar and processed food industries. Together, CAFTA members account for more than 90% of Canada's agri-food exports, which, in 2019, reached over $60 billion, and support about a million jobs in urban and rural communities across Canada.

A significant portion of these jobs and sales would not exist without competitive access to world markets.

Mr. Brian Innes (Vice-President, Canadian Agri-Food Trade Alliance) :

Despite this incredible success, we're facing unprecedented uncertainty. Predictability has been eroded, and governments are putting in place tariffs and non-tariff measures that blatantly contradict trade rules. It's happened here in North America, and it's happening abroad. Last spring, CAFTA released a prescription for what's required from trade agreements in this new environment. Realizing Canada's export potential in an unpredictable and fiercely competitive world outlines what is required for Canadian agri-food exports to continue to set records.

CAFTA's first recommendation is to preserve and enhance access to key export markets, which is exactly what ratifying and bringing CUSMA into force as quickly as possible would do. We understand the nationalist noises swirling around. We saw them firsthand when we attended the negotiation rounds for CUSMA in all three capitals. It's why we applauded when Canada concluded talks last fall. It's why CAFTA welcomed the end of aluminum and steel tariffs. We appreciate the value of tariff-free markets because, for the agri-food industry, tariff-free access has been incredible for our sector.

Over the last 25 years Canadian agri-food exports to the U.S. and Mexico have nearly quadrupled under NAFTA. They've gone from $9 billion in 1993 to $34 billion in 2019. Today, the U.S. and Mexico are our first- and fourth-largest markets, representing about 55% of all of our agri-food exports. We at CAFTA support CUSMA because it will build on the success of NAFTA. It will preserve our duty-free access to North American markets, and it's this duty-free access that is the foundation of the success of our sector.

Our members, including the hundreds of thousands of farmers, ranchers, food processors and agri-food exporters across the country, rely on trade for their livelihood. We're very pleased that the Canadian government is taking steps to ensure that CUSMA is brought into force.

Ms. Claire Citeau :

Our members emphasize the following outcomes as key benefits of the new CUSMA. The agreement contains no new tariffs or trade-restricting measures. All agricultural products that have zero tariffs under NAFTA will remain at zero tariffs under CUSMA. Maintaining predictable, duty-free access to the North American market is a major win for Canada's agriculture and agri-food exporters, which will help strengthen the supply chains that have been developed for the past generations across North America. The new agreement includes meaningful progress on regulatory alignment and co-operation.

In particular, I would note the establishment of the working group for co-operation on agricultural biotechnology and the creation of a new sanitary and phytosanitary committee, which will help ensure that regulations are transparent and based on science, and that trade in North America flows freely, fairly and abundantly. Another key benefit for our members is the preservation of dispute resolution provisions that are vital to ensuring that fair and transparent processes are in place when disagreements arise. Preserving

chapter 19 in its entirety and much of

chapter 20 from the previous NAFTA are important wins for our members. Market access improvements for Canadian agri-food exporters include increased quotas for refined sugar and sugar-containing products as well as some gains for some processed oilseed products like margarine. These are all welcome wins. All these advances will help consolidate the gains of the original NAFTA and provide certainty in the North American market, which is really essential to the success of Canadian agri-food manufacturers and exporters.

In closing, CUSMA represents a meaningful upgrade to NAFTA for our members by keeping our trade tariff free, establishing processes that help remove remaining technical barriers to trade and maintaining vital provisions to deal with disputes. We look forward to working with the government to bring CUSMA into force as soon as possible so that our members can realize its benefits as quickly as possible.

The Chair :

Thank you very much. We'll go on to Mr. Lowe for the Cattlemen's Association.

Mr. Bob Lowe (Vice-President, Chair of Foreign Trade Committee, Canadian Cattlemen's Association) :

Thank you, and good afternoon. My name's Bob Lowe and I'm a rancher and feedlot operator in southern Alberta. I'm also the current vice-president of the Canadian Cattlemen's Association, the national voice of Canada's 60,000 beef operations. I'll just add a little correction. With me is Fawn Jackson, who has gone through the environment portfolio and is now the senior manager of government and international affairs with the Canadian Cattlemen's Association. The CCA has long been an advocate for free trade, and today I'm here to encourage all parliamentarians to swiftly ratify CUSMA.

Under both NAFTA and CUSMA, the beef industries of Canada, the United States and Mexico have and will enjoy reciprocal duty-free trade between our countries. North America is the largest market for Canadian beef, and the integration of our markets makes us more competitive internationally. The next generation is involved in my family farming operation, and I can tell you that I'm excited for their future. Last year, following the implementation of the CPTPP, Canadian beef saw an impressive demand bump. Our exports overall grew 19% in value and, specifically, 68% in value in the Japanese market.

I bring this up because a similar demand increase happened following the implementation of the original NAFTA. Under NAFTA, Canadian beef exports to the U.S. grew 340% in total value, from $500 million in 1995 to $2.3 billion in 2019. Similarly, beef exports to Mexico grew over 30-fold in value from $3.7 million in 1995 to $127 million in 2019. All of this is to say that trade agreements are not only fundamental to the viability of farming and ranching operations from coast to coast, but are also the foundation for growth of Canada's agricultural sector.

For my cattle operation, having American buyers in the Canadian market for live cattle means that I can rest assured that I have a competitive market to sell my cattle into. Today, we are seeing an example of this in eastern Canada, where cattle producers are struggling financially, as a technical issue has essentially removed American cattle buyers from their market. This has resulted in significantly depressed prices and is an unfortunate example of just how important having an open and competitive North American cattle market is.

Having North American buyers participate actively in the Canadian market is imperative to the financial well-being of Canadian farmers.

(1540) Ms. Fawn Jackson (Manager, Environment and Sustainability, Canadian Cattlemen's Association) :

It's not just reciprocal duty-free trade that is important, but also the progress on regulatory alignment, co-operation, and avoidance of factors disruptive to trade. We were quite relieved that the negotiators thwarted efforts to bring back mandatory country-of-origin labelling, which cost the Canadian beef industry billions of dollars between 2008 and 2015. Additionally, the new agreement includes a

section that highlights the commitment to not disrupt trade through labelling. We were pleased to see the shared priority emphasized in CUSMA. We were gratified to see the creation of a new sanitary and phytosanitary committee within the agreement, as well as a preservation of the dispute resolution provisions. I'd also like to add that the economic outcomes are not the only highlight of growing Canadian beef export demand. There are also many environmental benefits that go along with a vibrant Canadian beef sector. Per kilo of production, Canadian beef has less than half the average global carbon footprint.

Here, in the Canadian context, we know that a strong, viable beef industry is absolutely tied to the conservation of Canada's native grasslands, which are an at-risk ecosystem and a stable store of 1.5 billion tonnes of carbon. In closing, we encourage the swift ratification of Bill C-4. Growth is on the horizon for export-focused Canadian agriculture, and a strong, stable north American market is absolutely fundamental to our ability to optimize that growth.

The Chair :

Thank you very much. We'll move on to the Canadian Labour Congress, with Mr. Yussuff. Welcome.

Mr. Hassan Yussuff (President, Canadian Labour Congress) :

Good afternoon, Madam Chair and members of the committee. My name is Hassan Yussuff. I'm the President of the Canadian Labour Congress. My colleague Chris Roberts is the director of our social policy department. The CLC speaks on behalf of three million unionized workers, men and women across the country. It's a pleasure to join you here this afternoon. Canada has always been a trading country. Exports are vital to the Canadian economy, our communities and thousands of jobs.

Our steel and auto manufacturing, forestry, agriculture and resource industries depend on trade, and Canadians of course support a fair trade agreement that preserves good jobs, protects labour rights and preserves the ability of the government to regulate in the public interest. I participated on the government advisory council, providing input during the renegotiations of NAFTA. Canada's unions welcome the important gains for workers continuing in the updated Canadian-U.S.-Mexico agreement. These gains include the elimination of

chapter 11, the investor-state dispute settlement, the IDS provision in NAFTA; the enforceable labour rights provisions that are incorporated in the CUSMA as a standalone chapter; the inclusion of a provision restricting the import of goods produced by forced labour; increased North American content requirements for vehicles and a new labour value content requirement in auto manufacturing; the elimination of the NAFTA energy chapter, including the proportionality clause; the strengthening of NAFTA's general cultural exemption in its expansion to include digital industries; and a clear and general exception for indigenous rights.

This exception means that nothing in the agreement prevents a North American government from fulfilling its legal, social, economic, cultural and moral obligations to indigenous people. We're also pleased to see that

section 232 tariffs on steel and aluminum imports have been removed. These unfair tariffs caused significant hardship for Canadian workers. The elimination of

chapter 11 is an important step in protecting our environment. Too often, the NAFTA investor-state dispute settlement process allowed investors to sue Canadians and Canada over legitimate measures taken to prevent and limit damage to the environment. The environment

chapter in CUSMA includes new commitments to address environmental challenges. These address air quality, endangered species, ocean-depleting substances, conservation for biological diversity, marine pollution, illegal wildlife trade, illegal fishing and the depletion of fishing stocks. We regret the fact the U.S. negotiators blocked any mention of climate change in the agreement. As a result, CUSMA contains no reference to the Paris Agreement, despite the addition of a number of multilateral environmental agreements in the updated text.

The CLC welcomes the important improvements in CUSMA negotiated last year by the House Democrats and the U.S. Trade Representative.

These improvements include restrictions on the ability of the responding party to block the formation of a dispute settlement mechanism panel; changes to strengthen the prohibition of goods produced by forced labour; changes to strengthen the protection of workers from violence and physical intimidation; the introduction of a bilateral rapid-response labour mechanism to respond to the violations of freedom of association and collective bargaining rights; the removal of a provision requiring a 10-year market protection for biologics; and the reversal of the burden of proof on labour and environmental violations—this language now presumes that labour and environmental violations affect trade or investment between the parties unless the responding party can demonstrate otherwise.

Some areas of CUSMA continue to provide cause for concern among Canadian workers. CUSMA makes concessions in Canada's supply management of agriculture by opening markets to more U.S. dairy, egg and poultry products. These concessions will add to the pressure on Canadian producers resulting from market access granted under CETA and the CPTPP. Budget 2019 committed to providing up to $3.9 billion in support for supply–managed producers. However, workers in these supply-managed industries are not offered any protection in support if they lose their income or work due to the ratification of the CUSMA, CETA or CPTPP.

We recommend that the government take steps to ensure that these workers are not disadvantaged by the implementation of CUSMA.

(1545) The CUSMA facility-specific rapid-response labour mechanism represents an important step forward in labour rights. However, there are few stipulations that unnecessarily limit the responsiveness and scope of a modern mechanism. These include a provision requiring the complainant to first ask the respondent to conduct its own investigation of a potential labour rights violation at a facility covered by the mechanism. Only once there is a disagreement over the findings can verification by a panel of labour experts be invoked.

These facilities covered by the mechanism are limited to priority sectors that include manufacturing, service and mining, but exclude agriculture, forestry and the fishing industry, etc. To summarize, the gains achieved in CUSMA are notably significant. In our view, ratification of the agreement is critical to Canadian interests and the well-being of workers in Canada. Parliament's scrutiny of Bill C-4 is an important and necessary part of the legislative process. However, we urge the parties to pass Bill C-4 without undue delay. With that, I welcome any questions the committee might have.

Thank you very much for allowing us to present here today.

(1550) The Chair :

Thank you. We'll go to the United Steelworkers and Mr. Neumann.

Mr. Ken Neumann (National Director for Canada, National Office, United Steelworkers) :

Thank you, Madam Chair and committee, for the invitation to speak with you here today. I'm here as the national director of the United Steelworkers. I am representing the hundreds of thousands of Canadian workers who are members of our international union. Across North America, we represent more than 800,000 men and women who work in every sector of the Canadian and U.S. economies, many of whom work in trade-exposed industries. We also have formal links with organizations in Mexico. Our interest in ensuring that fair trade in the Canada-United States-Mexico agreement is very obvious.

With me is my chief assistant Mark Rowlinson, who will help answer any questions you may have in both official languages. First, let me say that the final version of this agreement is an improvement to both NAFTA and the original version of CUSMA signed in 2018. Our written submission goes into greater detail, but for the few moments I have before you now, I want to focus on what remains unfinished business on this file and what pitfalls may lie ahead if shortcomings are not addressed going forward.

In terms of the vital domestic steel industry, United Steelworkers applauds the requirement that 70% of steel used in vehicles must be melted and poured in North America. This represents a step forward for the Canadian steel industry. However, in my view, the seven-year timeline for this to come into place is just too long. The delay will allow the continued use of too much offshore steel in the auto supply chain, which will limit growth in the Canadian steel industry. Our union also represents the vast majority of unionized workers in the aluminum sector, most of them in Quebec.

We're very disappointed that similar provisions requiring aluminum to be smelted and poured in North America are not part of this final agreement. Prior to the conclusion of the final agreement, we outlined our position in November 2019 with a letter to Minister Freeland , urging her to ensure that aluminum articles that enjoy CUSMA benefits must be produced in Canada, Mexico or the United States from primary aluminum that's smelted and poured in these countries. Instead, the final deal contains weak language that the parties shall consider this given issue again 10 years from now. This is simply not good enough.

As a result, CUSMA fails to ensure that high-quality aluminum produced by workers making community-sustaining wages will be used in automobile production in North America. Of particular concern is the growing reliance by the Mexican auto industry on scrap and billets from low-cost offshore producers due to the lack of primary smelting capacity in Mexico. As the main aluminum-producing country in CUSMA, it was incumbent on Canada to insist on this protection for Canadian aluminum producers and its workers. It's disappointing that Canada's government failed in this regard.

The USW was at the forefront of the fight for a full cancellation of the U.S. tariffs on Canadian steel for the bogus national security reasons that were put forth. Unfortunately, CUSMA side letters still leave open the possibility for future

section 232 tariffs. We believe the government must continue to push for a full and sustained commitment from the United States that it will not deem steel, aluminum or other products from Canada a threat to their national security. Canada has also collected $1.2 billion from the tariffs imposed in retaliation for the U.S.

section 232 measures. That money should be invested in the Canadian steel and aluminum industries, particularly into training our workforces to meet the demands of the 21st century industrial economy. Let me now ask you to look at the forest industry.

Chapter 10 of CUSMA, under “Section B: Antidumping and Countervailing Duties”, will not protect our forest sector because it does not prevent the U.S. from applying duties to softwood lumber. This dispute has never been resolved. Canada has once again missed the opportunity to permanently settle this issue before us. Meanwhile, our union represents more than 20,000 forestry workers, who have experienced layoffs and uncertainty because of this failure.

(1555) What is needed to sustain this vital industry is a combination of trade and domestic measures that promote value-added manufacturing. As I said at the outset, the steelworkers stand in solidarity with independent Mexican trade unionists. While CUSMA improves the prospects of free collective bargaining in Mexico, the proof will be in the enforcement and remediation for suspected violations of free collective bargaining, as set out in

chapter 30. As we told this committee in the last Parliament, the labour

chapter should have included core conventions of the International Labour Organization. These should be included in any future trade agreements that Canada negotiates. We are also concerned that

article 23.9 is not strong enough to protect workers from discrimination. More generally, the labour

chapter will achieve its stated goal of raising the labour standards in North America only if all three governments take their role of enforcing these rights seriously. This means putting in place mechanisms that will ensure that Mexico, the U.S. and Canada are living up to their labour commitment under CUSMA. We are disappointed that there is no gender

chapter and no reference to the United Nations Declaration on the Rights of Indigenous Peoples. All three of our countries should have committed to this 21st-century obligation to righting the wrongs of colonialism. On procurement, our union is also concerned about allowing increased U.S. access to Canadian agricultural and dairy markets. In contrast, Canada did not make any gains on obtaining access to the large U.S. government procurement market. A significant misstep, in our view, is the provisions of

chapter 28, which allow advance notice to corporations of any impending regulatory changes that affect food safety, rail safety and workers' health and safety, amongst others. Using gentle words like “harmonization”, this provision undermines the ability to regulate in the public interest by providing corporations with the right to challenge the implementation of these regulations. This is unacceptable and, frankly, when we look back at events like Lac-Mégantic, very dangerous. The environment has not been given enough consideration in CUSMA. Although some improvements were made to

chapter 24, there is no commitment to the Paris Agreement on climate change. Nor is there any reference to combatting climate change. This is out of step with everything that we have come to understand about the climate crisis in the 21st century In closing, our union will continue to advocate for a fair and progressive trade system. Rather than periodic piecemeal progress in individual trade deals, we seek a trade regime that puts working Canadians at the forefront.

This means agreements that do not hamper the ability of our government to ensure high labour and environmental standards and that do not make it easy for unfairly traded goods to enter our markets from countries with poor labour and environmental standards. Despite the improvements to CUSMA, this deal is insufficient on its own to revitalize the Canadian manufacturing industry. We must use policy measures to promote domestic manufacturing and the use of Canadian-made products in infrastructure projects.

We must protect our market from dumped goods from offshore by continuing to improve our trade remedy system, including allowing unions to initiate trade cases and not merely to participate. We also demand a more meaningful analysis of the sectoral and employment impacts of trade agreements, including real consultation and collaboration. Thank you for the opportunity. Mark and I are happy to answer any questions you may have.

The Chair :

Thank you very much, Mr. Neumann. Now we move to our questioners, beginning with Mr. Hoback.

Mr. Randy Hoback (Prince Albert, CPC) :

Thank you, Madam Chair. Thank you, witnesses, for being here this afternoon as we deal with a very important issue and move forward. I'm going to start quickly with the agriculture guys and then move to Mr. Neumann because I have a few questions for him. With regard to the NAFTA agreement from an agricultural perspective, do you see any issues here that we should really be concerned about?

Is there anything that sets off an alarm, that says, oh, this could be a problem, whether it's the phytosanitary provisions or the way we deal with things at the border, or is this just business as usual and we just want to get back to being stable and keep moving forward? Maybe, Mr. Lowe, I'll start with you and then I'll move to Mr. Innes.

Mr. Bob Lowe :

From the beef perspective, the important thing is stability of the markets and getting it going. We live in a pretty unstable world where trade is concerned, and this is an opportunity to stabilize that. That's what we're looking for. For beef we're basically at the same place we were with NAFTA before, and it worked very well before.

(1600) Mr. Randy Hoback :

Yes, without COOL.

Mr. Bob Lowe :

Exactly, without COOL.

Mr. Randy Hoback :

Mr. Innes, or Claire.

Mr. Brian Innes :

Yes, with respect to the rest of CAFTA's membership, we support implementation of this because it will provide stability. A number of barriers remain that prevent full and free trade in North America, but by maintaining NAFTA it enables the stability that enables us to grow, and that's why it's important to pass it.

Mr. Randy Hoback :

As conservatives, we've been very aggressively trying to move forward on this piece of legislation and this bill to get it done with, but in the same breath, we have to respect that there are problems with the legislation and that people need to have a chance...so that this government can better tell us how it is going to mitigate those problems. In the ag sector, from what I can tell, they're pretty comfortable with most parts of it. They're happy with the bankability and stability and they don't see any reason to hold it up. They'd rather see it move forward. We hear you. Mr.

Neumann, you talked about the forestry workers. We had a forestry fund set aside for forestry workers, yet I can't tell you where it went. Can you tell me where that money went, and can you say if it had any impact on our forestry workers?

Mr. Ken Neumann :

It surely hasn't had any impact on our members. As a matter of fact, our members are struggling quite significantly. The fact is that forestry is not something new to any government. There have been numerous governments before. We've been successful before the WTO, where we've won every single case. But the fact is we are still here today, and we still don't have a solution. The Americans have the ability to impose a duty. Right now there is a duty in excess of 20%. The market is soft, and we're having layoffs. We've had some disputes. It's a tough situation. We've not seen that big flow of money.

There has been some interim adjustment, for example in the beetle situation, but overall our members are struggling, and that's why we're disappointed there has been no solution.

Mr. Randy Hoback :

Mr. Neumann, I don't mean to interrupt you. I'm sorry. I only have five minutes. Have you talked about mitigation? Have you done any analysis of the impact on the forestry side? We've been waiting for this economic analysis from the Liberal Party for a while, and we finally got a motion forward today that it actually will come here to this committee. We have to do our due diligence. Have you done any economic analysis of NAFTA, or do you have anything that you could offer in regard to that?

Mr. Ken Neumann :

Maybe Mark can answer that. He deals with the trades.

Mr. Mark Rowlinson (Executive Assistant to the National Director, United Steelworkers) :

On the forestry sector specifically, all we know is that about eight mills have closed in western Canada in the last eight or nine months as a result of the softwood lumber duties. The problem.... Regarding the package you mentioned that was announced by the government at the time the duties were reimposed, prices at that time in the forestry sector were very high—

Mr. Randy Hoback :

They're still too high.

Mr. Mark Rowlinson :

—so none of that money really went out the door. Unfortunately, now that our members really need it, it doesn't appear to be available. That's the problem we have.

Mr. Randy Hoback :

In terms of the mitigation I talked about, in light of this situation, the scenario of these mills shutting down, have you presented a plan to this government that would mitigate some of the harm from the fact that we don't have a softwood lumber agreement included in NAFTA or in a side chapter? How would you like to see—

Mr. Mark Rowlinson :

We have presented a number of plans to provincial governments and to federal governments. The first thing we need is to have those illegal softwood lumber duties lifted. That's the first thing we need. It is an integrated North American market, but as Ken mentioned, it's essential that we have more value-added manufacturing in the forestry sector, in the wood sector, in this country, rather than just shipping raw logs offshore as we are currently doing. The plan needs to include fair trade, which we don't currently have, and more value-added manufacturing in Canada. That's how you're going to create jobs in the forestry sector.

Mr. Randy Hoback :

So as a committee, we could look at what we can do to help you get that value out of the forestry products utilized here in Canada. Is that fair to say?

Mr. Ken Neumann :

Just on the value added, that's an issue we have been raising for years and years. We've been ringing that bell. The fact is you continue to cut the logs. You float them up the river. You load them onto a ship. You send them over to Asia, and they come back maybe as this furniture that we're currently sitting at. It makes absolutely no sense. We've been blowing that horn. We've seen mill after mill closed down. The softwood issue has been around not just since yesterday or two years ago; it's been around for many years. We've been successful before the courts, and we're still struggling with it today. We've lost thousands and thousands of jobs, and those jobs aren't going to be coming back.

Mr. Randy Hoback :

Yes, that's really sad. Am I done?

The Chair :

You have 40 seconds left.

Mr. Randy Hoback :

Back to you, Mr. Lowe. I want to quickly talk about the beef sector again. You have a feedlot in southern Alberta. With the U.S.-China deal that's been rumoured, does the fact of our being part of NAFTA enhance our ability or detract from it? How do you see that impacting your operation?

(1605) Mr. Bob Lowe :

I think it enhances our ability to trade with any place. If we're having trouble trading with our closest neighbour, how does any other country in the world think they can trade with us?

Mr. Randy Hoback :

So you're not looking at it as threat at all.

Mr. Bob Lowe :

It's not a threat at all, no.

Mr. Randy Hoback :

Okay. I'll stop there, Chair.

The Chair :

All right, thank you very much. Mr. Sheehan.

Mr. Terry Sheehan (Sault Ste. Marie, Lib.) :

Thank you very much. Thank you very much for all your testimony today. It's very important as we undertake this tremendously important trade deal for Canada and for my riding of Sault Ste. Marie. We are a steel town but we're also a border town, and a lot of that trade comes right through my riding. When we talk about the

section 232 tariffs, we were on the front line of that battle. We've travelled down to Washington with the trade committee, the industry committee, the steel caucus. The steelworkers, both on the Canadian side and the American side, played a critical role. Our good friend Leo was referenced by many of our American friends down there about lobbying. One of the things I wanted to ask about was the significant changes we've made to our trade regime over the last five years, including in 2016 the length of time a penalty would remain on a bad player and some consultation.

Then there was anticircumvention, antiscoping, etc. The one piece was union participation. Having heard from the steelworkers who testified here at the CIIT hearings—and the representations they made were significant—we won cases because of that particular testimony. I think that was critical. In particular to your presentation, Ken, how could the steelworkers launch a case successfully, as they've done with union participation?

Mr. Ken Neumann :

Obviously, we'd need a legislative change giving us that status. I'm sure you can attest to the fact we work hand in hand with the companies, the Canadian Steel Producers Association—which I understand will be testifying later. We recognize the importance of these particular jobs. Mark, my assistant, spends a lot of his time in Ottawa before the CIIT. We've had people from Tenaris and Saskatchewan and Manitoba to come here to give testimony to protect us from unfair dumping, so that we can continue. Just recently we're getting favourable decisions. Our union counterpart in the United States has access.

We have access to file trade cases on rubber, tire. We have filed in excess of 80 cases, I think it's close to 90, and the fact is that we work hand in hand with the employers to protect those jobs and those communities. Currently we had a step in the right direction when Minister Morneau made an amendment that we have the right to participate. That doesn't give us the right to file a complaint when we can see pipe coming by our facility in Calgary or Regina, whatever the case may be. We should have that right.

That's something we're going to work towards and expedite, and we're going to be working with the CSPA because we've got that trust. We're with them hand in hand when we're here in Ottawa defending our interests to make sure that we're not getting pushed over by China or some of these other countries who are just basically looking for some place to dump their product. To us it's very important. The fact is we've lost capacity in the steel industry. You know it from the area you come from.

I'm sick and tired of bankruptcies and our companies going under and the devastation for our members who work in those communities and have spent their entire lives there. It means a lot to us and we have an opportunity. It can only be done by the government seeing the need of the trade unions to have the right to file complaints on behalf of their workers.

Mr. Terry Sheehan :

Thank you very much. I'll move to you, Mr. Yussuff.

Mr. Hassan Yussuff :

Very briefly, I want to echo the point Ken is making. It seems quite absurd. The employers have the ability to file a complaint under the legislation, but the worker has no ability. Who speaks for the workers as to how these cases are viewed? Quite often I think most of the employers obviously have a self interest, but specifically in regard to the impact on workers, only the unions can do that in a very definitive way.

When the minister was looking at what else he could do in regard to the changes he was making, this was one of the points we supported for our colleagues and the steelworkers to see this amendment made. I think it would be good for this committee to recommend this, because there are no obvious reasons as to why unions don't have the ability to file a complaint, especially when their members are impacted by cheap imports coming into the country, or a surge from other countries who can get access to the States, and who are able to access Canada using that.

Some good work has been done to monitor that, but I think, more importantly, the right of the union should have to file a complaint is a fair one that's been demanded for quite some time.

(1610) Mr. Terry Sheehan :

Thank you very much.

The Chair :

You have 40 seconds.

Mr. Terry Sheehan :

Okay. I'll go with a question for the cattlemen's association. It's almost a statement. I know that they're interested in expanding. They've enjoyed some success with the TPP and a couple of tariff reductions. They've met with me about looking at areas in northern Ontario as well in order to expand and to grow. Again, we're very close to the border up there. I don't know if there are any plans to look at northern Ontario in a more fulsome way in the future.

Ms. Fawn Jackson :

The access we have gained over the last number of years has seen an impressive demand signal sent to the Canadian beef industry. Last year, we saw an increase of just about 20% of our exports. We are looking to continue to grow, hopefully, for the contribution that we can make to the economy and to the environment here in Canada.

The Chair :

Thank you very much. I'll move on to Mr. Savard-Tremblay.

[ Translation ]

Mr. Simon-Pierre Savard-Tremblay (Saint-Hyacinthe—Bagot, BQ) :

Thank you, Madam Chair. Good afternoon. Thank you all for being here today and making time for us in your busy schedules. My question is for the United Steelworkers representatives. As you know, the Bloc Québécois has been very active on the aluminum front. We have spoken out against the difference in the way steel and aluminum are treated, and your position today confirms that there is a difference. In your brief and your comments to the committee, you indicated that you would have wanted the same measures applied to both. What are the potential consequences of both sectors not having access to the same protections?

[ English ]

Mr. Ken Neumann :

I'm sorry, but I missed part of your question because I didn't get the translation. I think I get the gist of it. I'll let Mark answer some of it. Look, on the aluminum sector, as I've said, I've had the opportunity to be in Quebec several times. I've been to Alma and the Rio Tinto facilities. I remember that prior to the tariffs being imposed, we had a commitment from Rio Tinto that they were going to expand. They had seen an opportunity, as the U.S. was using a lot of aluminum. Like I say, we're very disappointed now that because of what's transpired that expansion is not going ahead.

There's no reason why you shouldn't have the same for steel and aluminum. The fact is that when you look at the tripartite agreement with Mexico and at the number of vehicles Mexico has been building, you see that they're now building in excess of three million vehicles. They have surpassed Canada, which is at 2.3 million. The fact is, that's going to require some aluminum. To us, that is a very significant factor. I'll let Mark deal with the rest of it.

[ Translation ]

Mr. Mark Rowlinson :

I'll touch on the risk involved. As Mr. Neumann pointed out, the auto sector is growing in Mexico, but the country doesn't produce any aluminum, so the question is this: Where will Mexico get the aluminum it needs? It should get it from us, here in Canada, since we are by far North America's top aluminum producer. What we are seeing more and more, however, is that Mexico is turning to China, Russia and other countries for its aluminum supply. As you said, aluminum and steel don't enjoy the same protections in the auto sector. The Canadian market will likely continue to shrink. It's not adequately protected. That's our fear.

Mr. Simon-Pierre Savard-Tremblay :

Mexico could keep buying from China, then.

Mr. Mark Rowlinson :

Yes, not only could it keep buying from China, but it could also buy more from China.

Mr. Simon-Pierre Savard-Tremblay :

My next question is on an altogether different topic. It's for the Canadian Agri-Food Trade Alliance representatives. You talked about exports. As you no doubt know, under the new agreement, the United States could have some control over Canadian milk protein exports to the Middle East and third countries. Does that worry you?

Ms. Claire Citeau :

Our mission is to eliminate tariff and non-tariff barriers in key markets across all the sectors we represent, which exclude supply-managed sectors. We represent virtually the entire agri-food sector, except for areas under supply management. On the whole, rules and policies aimed at restricting exports do not sit well with our members, whether that means duties, tariffs, non-tariff barriers, quotas, tariff quotas, restrictive rules of origin, non-compliance with sanitary and phytosanitary measures, or any barriers related to technical rules.

(1615) Mr. Simon-Pierre Savard-Tremblay :

In other words, from the standpoint of non-supply-managed sectors, there are benefits, but you're saying that, according to your membership, certain risks are still possible for supply-managed sectors.

Ms. Claire Citeau :

What I mean is that we don't speak for sectors we don't represent, so we don't speak for sectors under supply management. Whether it's subsidies, tariffs, quotas or restrictive rules of origin, measures aimed at restricting trade in one way or another in our sectors are generally not looked upon favourably by our membership. Our mission is to eliminate tariff and non-tariff barriers, after all.

Mr. Simon-Pierre Savard-Tremblay :

However, we have quotas in the agricultural sector that all the members here consider beneficial. How much time do I have left?

[ English ]

The Chair :

You have 45 seconds.

[ Translation ]

Mr. Simon-Pierre Savard-Tremblay :

All right. I have another question for our friends from the United Steelworkers. If I understood you correctly, the changes when it comes to softwood lumber are merely cosmetic. In other words, there hasn't been a clear pullback in that sector. It was overlooked in the negotiations.

Mr. Mark Rowlinson :

Basically, yes. That's correct. There isn't much change. What we are looking for is a way to get rid of the tariffs the United States is currently imposing on softwood lumber. Nothing in the agreement, however, puts a stop to the tariffs being imposed.

Mr. Simon-Pierre Savard-Tremblay :

I assume my time is up.

[ English ]

The Chair :

Mr. Blaikie.

Mr. Daniel Blaikie (Elmwood—Transcona, NDP) :

Thank you very much. I want to talk a little bit about the issue of the labour

chapter and particularly the provisions for Mexico. In your opening remarks, you mentioned a bit about how much is going to hinge on the enforcement of that and what enforcement of that would look like. It seems there is a genuine opportunity to start incorporating into a trade agreement something that would make it not just about creating opportunities for business to exploit low-wage economies in order to increase their margins, but to actually start implementing some fair labour practices cross-border. I'm curious to know what you think needs to happen.

The NDP is supportive of the idea of having a committee on the Canadian side that would ensure that government had access to the best advice from people in the labour movement here, and also in the business community where there are examples of successful labour relations. I'm wondering what you envision successful enforcement looking like from the Canadian point of view in terms of how we can optimize the potential of these clauses and move forward on that. Maybe we can start with Hassan and then go to Mr. Neumann.

Mr. Hassan Yussuff :

Given the limited time, I'll be very brief. As you know, under the previous agreement, there were a number of complaints filed under the old NAALC, which is part of the current agreement. Not a single one of them has ever been resolved in a satisfactory manner. It's been a complete failure. First of all, it was a side agreement with no real commitment to its being enforced. Mexico never lived up to its obligations. I think this time around at least the labour

chapter is incorporated into the agreement. There's a clear commitment to apply sanctions if the countries can't live up to that obligation. I think the enforcement side of this agreement is really critical. Certainly there was a new government at the national level in Mexico that made a strong commitment. They want to, of course, meet their obligations, because workers never really benefited from decades of the old NAFTA. If you look at their wages and working conditions, they have not risen, and most importantly, workers didn't even have the right to choose their own union.

More importantly, when they met with violence, it was sanctioned by the national government. This is an opportunity for Canada and the United States to hold the Mexican government's feet to the fire to enforce this agreement. Of course, in that commitment to do so, they're going to need help. There are thousands and thousands of agreements that have been negotiated under what is called “labour protection”. The workers never participated in these agreements. They never chose the union, and the agreements are still in existence, so how do we eliminate those agreements?

How do we give the workers a fair chance to choose their union democratically, in a fair way? More importantly, how do they negotiate an agreement so they can benefit from the products they're producing in that country? Canada has an obligation because we promised to provide Mexico technical assistance, and also financial assistance. I think it's critical that Canada gets as much broad advice as we can from the labour movement here, but equally hold Mexico accountable for the commitment they have made in this agreement.

When they don't live up to it, we should impose whatever sanction is necessary to bring them into compliance. That never happened under previous agreements. The provisions in this agreement allow for that to happen.

(1620) Mr. Ken Neumann :

To what Hassan said, the fact is that this was the line in the sand. The American labour movement and the U.S. Congress basically said that that was one reason they weren't prepared to move the CUSMA ahead, and they basically got the amendments they thought were appropriate. Our union is very much engaged with Mexico. You've heard of Napoleón Gómez, who is the president of the miners and steelworkers in Mexico. He was in exile in Canada for 12 years. The steelworkers harboured him. He's now back in Mexico, and he's a senator. First of all, the labour

chapter is very important. As Hassan mentioned, if you look at the labour rights, they've not lived up to them, and there are protectionist contracts.... There are a lot of workers in factories that belong to the union and don't even know it. Those are deals that are made that undercut the legitimate trade union movement. In fact, if you look at the salaries and the other things that are taking place, you see that these also affect us. Now that we have a mechanism in place, it's very important they be given the infrastructure to do it.

This is why I said in my submission that Canada and the United States and Mexico have to be serious about it. I was led to believe that if you look at the current labour law in Mexico, you see that they have some of the best labour laws in the world. The fact is it's not enforced. If it's not enforced, it's worthless. This is the mechanism and we have an obligation, because if you want to continue to see their auto sector grow from 1.2 million to 3.3 million vehicles—it has surpassed Canada's—it's going to continue to grow at our expense because we can't compete.

The big companies would gladly go to Mexico and build their auto factories there. We have an opportunity now to enshrine some mechanisms to enforce the labour laws, and that's what's crucially important. I see that as something like a watershed with respect to moving this in the direction. It's now up to all governments, in particular Canada and the United States, to make sure that this mechanism is enforced. Thank you.

The Chair :

You have 45 seconds. Okay, Mr. Kram.

Mr. Michael Kram (Regina—Wascana, CPC) :

Thank you, Madam Chair. We are joined today by my colleague, Richard Martel. I will be splitting my time with him.

[ Translation ]

Mr. Richard Martel (Chicoutimi—Le Fjord, CPC) :

Good afternoon everyone. My question is for the aluminum and steel representatives. It's straightforward. How long ago was the last massive investment in a steel or aluminum plant in Canada?

Mr. Mark Rowlinson :

The last one?

Mr. Richard Martel :

Yes, the last one.

Mr. Mark Rowlinson :

Do you mean investments made by companies or supported by the government?

Mr. Richard Martel :

I mean those by companies.

Mr. Mark Rowlinson :

It's been a long time.

Mr. Richard Martel :

Do you think?

Mr. Mark Rowlinson :

The last time a steel plant was built in Canada was 1978. Some investments have been made since, but you'd have to understand how big and small investments are defined. Small investments are ongoing. In the aluminum sector, a plant was built more recently. The Alma plant was built in 1992, I believe. There hasn't been much investment of late, though.

Mr. Richard Martel :

Do you think CUSMA could prevent new aluminum plants from being built?

[ English ]

Ms. Rachel Bendayan (Outremont, Lib.) :

On a point of order, Madam Chair, I believe this witness is from the United Steelworkers, and we seem to be asking specific technical questions about aluminum, which is another product.

(1625) Mr. Randy Hoback :

He can ask whatever he wants.

The Chair :

He has his time. As long as he is respectful of our guest, he's free to ask.

Ms. Rachel Bendayan :

Thank you.

[ Translation ]

Mr. Mark Rowlinson :

I'd like to clarify something, if I may. We represent the vast majority of unionized aluminum workers, so not just steelworkers.

Ms. Rachel Bendayan :

Thank you for that.

Mr. Mark Rowlinson :

All aluminum plants are run by multinationals. They make the investment decisions, so they invest in countries with guaranteed market access. The problem, as we see it, is that the agreement before us today doesn't do enough to guarantee them a market, especially in Mexico and in the United States.

Mr. Richard Martel :

Thank you.

[ English ]

Mr. Michael Kram :

Thank you, Richard. Thank you to the members of the United Steelworkers for being here today. I'm particularly glad to see you here because my home city of Regina, Saskatchewan, is home to Evraz steel and United Steelworkers local 5890. I'm glad to be able to represent them here and to hear from you as well. With regard to pipelines, can the two of you speak a little about the importance of pipelines to your members, in particular for their job security?

Mr. Ken Neumann :

I can tell you that it's always been an issue. The fact of the matter is.... I think you may be referring to some recent events when people in Saskatchewan were complaining about the pipeline. With the United Steelworkers, our position is very clear. Any pipe that's going to be laid is built by our members. We just came out of a national policy conference in Vancouver where our members from across the country unanimously adopted a motion stating that where pipelines are be built, they will use Canadian/North American products. You have the pipelines that are being built in the United States.

One of the things we ask for in steel projects is that we make sure in procurement situations that it's North American steel, not Japanese steel or Indian steel. It's the same thing for bridges or any of those things that are taking place. We expect this for any of those products that we have the ability to make. I look at our colleagues up in the Soo. The fact is that we have a bridge that's going to be built up in British Columbia—the Pattullo Bridge—and I'm hoping that our colleagues get the contract for that. It's no different from pipelines. We are very much on record.

The fact is that with any pipelines being built they use the products of Canadian steel. I know very well the facility in Regina that you're talking about.

Mr. Michael Kram :

Okay. Very good. Given the extreme difficulty in recent years in getting pipelines approved and built in Canada, do you see any opportunities under the new NAFTA to get pipelines built in the United States with steel built by your members?

Mr. Mark Rowlinson :

I'm not sure this agreement is going to have much effect on U.S. energy projects, but as Ken said, our position is clear that those projects should be built using North American steel. To your point, I think a healthy energy sector has enormous downstream effects for the broader Canadian economy, including for our members, who make not just pipelines but pipe used for pipelines, as they do at Evraz steel, and also for the broader range of energy tubular goods that are made at facilities such as Tenaris in Sault Ste. Marie or Calgary.

The Chair :

Thank you very much. We'll go on to Mr. Dhaliwal.

Mr. Sukh Dhaliwal (Surrey—Newton, Lib.) :

Thank you, Madam Chair. Thank you to all our witnesses who are here today to make a very positive and constructive contribution to this important agreement. My question is for the Canadian Labour Congress. President Yussuff, Deputy Prime Minister Chrystia Freeland was here this morning and was asked a question about how this agreement is going to promote gender equality when it comes to minorities. She mentioned that this is protected under the labour chapter. Could you comment on that if you have knowledge about it and how this agreement is going to deal with that situation?

Mr. Hassan Yussuff :

The

chapter speaks to harassment and gender violence in the workplace. Of course, the agreement itself has an impact, if it's in force, to prevent that from happening. Of course, these are the same obligations that we know of in our own country. The human rights code can, if it's in force, prevent harassment and violence from happening in the workplace. As we know, workers in Mexico have faced a lot of violence, not just gender violence but simply violence when exercising their democratic right to choose their unions or, for that matter, to vote on a collective agreement.

We hope the provisions in this agreement, if they're enforceable, would bring an end to that, but at the end of the day, it obviously will require efforts to change the practice that we know exists in Mexico. More importantly, of course, it will require all three countries to live up to the obligations that are stated in the agreement in regard to the new enforceable labour

chapter that we had hoped could have teeth. If a country chooses not to do so, there also are provisions to impose sanctions on that country for not living up to their obligations as stated in the agreement.

(1630) Mr. Sukh Dhaliwal :

Thank you. I have a question for the Canadian Cattlemen's Association. You mentioned that previously when the NAFTA was signed, the cattle industry skyrocketed. The CPTPP helped a lot as well, and this is going to help. Could you tell me the dollar figure or the percentage of trade that you see being of benefit when it comes to the cattle industry?

Ms. Fawn Jackson :

First, in the North American market, our push for ratification is really tied to a stable North American market. Certainly, the number of free trade agreements that have been developed over the last number of years has really led to the strong demand we're seeing today in the international market. Of course, for us, our biggest customer is the United States, and Mexico follows not far after that, so stability is really key to two of our biggest customers.

Mr. Sukh Dhaliwal :

Does it matter whether it's eastern Canada or western Canada, or is it going to help from coast to coast to coast?

Ms. Fawn Jackson :

It's going to help farmers and ranchers right from coast to coast.

Mr. Sukh Dhaliwal :

So British Columbians will benefit from this.

Ms. Fawn Jackson :

Yes, there are ranches in B.C. as well.

Mr. Sukh Dhaliwal :

Thank you. What's my time?

The Chair :

You still have a minute and a half.

Mr. Sukh Dhaliwal :

I will share my time.

[ Translation ]

Mr. Stéphane Lauzon (Argenteuil—La Petite-Nation, Lib.) :

Good afternoon all. Thank you for being here today. CUSMA is very important to a big riding like mine, which is home not just to farmers, but also to steel and aluminum workers. I'm a welder by trade. I spent more than 26 years in the steel industry. My brother is a top employer in the steel sector in my region. All that to say how important and historic this agreement is to my family and to the government. Mr. Neumann, you've often mentioned the steel and aluminum sectors in the same sentence. If we set aside the aluminum industry for a moment, can we agree today on the fact that people in the steel industry are quite pleased with CUSMA?

[ English ]

Mr. Ken Neumann :

Look, I don't want to be the fly in the ointment. The fact of the matter is that everybody is looking forward to getting ratification done, and my point is very simple. It's like closing the barn door after the horses have left. You have Canada and Mexico, who have already ratified the deal, and it was the United States that held it up because of some amendments. So, yes, I think the steel industry is right, but we're still hurting from the illegal tariffs that were imposed upon our members, the communities and the companies that you talked about. They're still hurting from those.

There's $1.2 billion that the government has accepted, and the fact is: What are we going to do about that? Yes, I think it's a fair comment. We've had an integrated market between Canada and the United States. You can't find a better neighbour, but what disturbs us is what they've done to the aluminum industries, and that is unfair. So I don't disagree with you that the steel industry is—

[ Translation ]

Mr. Stéphane Lauzon :

I agree with your point in relation to the steel sector.

[ English ]

The Chair :

I'm sorry, Mr. Lauzon, but the time is up. We'll go on to Mr. Carrie.

Mr. Colin Carrie (Oshawa, CPC) :

Thank you very much, Madam Chair. I want to thank the witnesses for being here. Ken, I'd like to ask you a question, because you brought up some things that are close to my heart. You brought up the automotive industry, and you know that in Oshawa this deal wasn't enough to save our plant, but the whole idea of competitiveness and value added are big issues, I think. When we're moving forward with this agreement, if there's something that we could do to support industries that may be negatively affected, I think would be so important.

Gerdau Ameristeel is in the Durham region, and they work mostly as a recycler, but you mentioned something about the buy American provisions. I know that our government under Mr. Harper was able to get an exemption from those provisions. Could you comment on how that's going to affect your members, not having that same exemption that we used to have? The other thing about the value added is that we have this huge Kitimat LNG project.

I think it's a $22 billion project, and my understanding is—and correct me if I'm wrong—that the government gave the Chinese an exemption on that as far as making certain components is concerned. Could you expand on the value-added statement you made? Right now the whole idea of trade with China is a conversation. The Americans have completed what they're calling phase one of their U.S.-China deal.

I know I've asked a lot of things in this question, but maybe you could address the question about value added, the buy American clauses, and what we can do as a committee to help support the people who will be negatively affected by not having that exemption in the deal.

(1635) Mr. Ken Neumann :

Perhaps Mark will answer some of that. Let me just deal with the China situation and the big project that's taking place in British Columbia. You may have read some of our press releases. We're very disappointed with regard to the fact that it's a huge project that will create thousands and thousands of jobs and that will have steel coming from China. It will be shipped over in modules and then shipped up into the north. If you want to talk about the cost to the environment, if you want to talk about the jobs, it makes absolutely no sense.

To me, if we're going to produce something in Canada, we've got the ability to do it, and we should do it with our members. We should do it with our steel. Look at the Gordie Howe bridge. I was involved in that with Leo Gerard, my counterpart at the time. We made sure that the Gordie Howe bridge was going to be built from North American steel, and it was. We're talking about the bridge that's now going to be built in Surrey. Procurement is very important. This is what I said in my submission, that the government made no inroads in getting into some of the government contracts.

That's something that needs to be on the radar. I'm still livid at the fact that somehow the United States used

section 232 to say that Canada was a national security threat. You can't find a better neighbour than us. That's something we need to monitor. The fact is that it has an effect. We've seen it. You have the Champlain Bridge and some of that steel. Tell me why the steel has to come from China. You have a bridge that was built in British Columbia. Why does the steel have to come from China when you have the industry here? The thing that we should all remember is that if you look at the aluminum industry or the steel industry, there ain't a single Canadian-owned company. These are all foreign companies.

We deal with these companies, be it at negotiations or at.... We have to fight. We have to fight tooth and nail for investment. We want them to anchor, be it in aluminum or in steel, to make sure that those jobs are preserved. When we're competing with Arcelor, do we invest in the Soo, do we invest in Hamilton, or do we invest in some third world country? Those are the kinds of complications. If we don't have the support of the governments and make sure they're fighting on our behalf in regard to the U.S. to get access to their procurement.... Canada's steel capacity has shrunk.

Now we have the issue with aluminum, which I'm very much concerned about. The powers that be somehow think they're going to be able to monitor that and see how that works out. The proof will be in the pudding on that one.

Mr. Colin Carrie :

Do you have a quick comment, Mr. Rowlinson?

Mr. Mark Rowlinson :

Just very quickly on the issue of procurement and buy American, you're correct that when President Obama introduced his buy American plans, Canada was granted an exemption. The U.S. procurement market is over 10 times the size of the Canadian procurement market. It is essential for Canadian producers in all manufacturing sectors and industries to have access to that procurement market. It is disappointing to us in the extreme that this agreement does not guarantee us access to that procurement market. Rather, we will have to revert back to the WTO general agreement on procurement, which is a voluntary agreement.

We have no real ability, therefore, to legally limit the United States' ability to implement buy American with respect to their procurement, which would limit Canadian access to that market.

Mr. Colin Carrie :

Thank you very much. I have been hearing from people who are really disappointed about that. I do want to talk to the cattlemen and agri-food people about this clause where, if Canada does business with a non-market economy, we almost have to get permission from the United States to make those trade agreements. You mentioned, Mr. Lowe, that you weren't too worried about the U.S.-China agreement. My understanding is that the Chinese have agreed to buy $75 billion more in manufactured products from the United States and $40 billion more in agriculture. I was glad to hear that you're not too concerned about it.

Do you have a concern, though, that we will almost have to ask the Americans if we're going to have our own agreement with China? Does the fact that the China-U.S. agreement was made before this agreement have any implications?

(1640) The Chair :

I'm sorry, but to a long question I'll need a relatively short answer.

Mr. Bob Lowe :

I'll turn this over to Fawn. We looked into that just this morning.

Mr. Colin Carrie :

Thank you.

Ms. Fawn Jackson :

In terms of the China-U.S. question, when product is moving off of North America, I think that benefits all of us. That's because our markets are so integrated. That generally makes us more competitive in the international market. On that side of the question, we're looking forward to seeing how that agreement gets implemented. On the first part of your question, perhaps I would turn it over to Claire and Brian to answer.

Ms. Claire Citeau :

That particular clause is not something that CAFTA members have commented on, so I will not today.

The Chair :

Thank you very much. Mr. Lauzon.

Mr. Stéphane Lauzon :

I will share my time with my colleague. [ Translation ] Earlier you talked about steel and the difference between steel and aluminum. In terms of what we've heard today, support for signing CUSMA and ratifying it as quickly as possible is almost unanimous. That's also the position of the Canadian Steel Producers Association, as per a December 11, 2019 press release:

It will benefit Canadian steel producers by further strengthening manufacturing supply chains in North America and by improving on the terms of NAFTA.

That's what Canada's steel producers had to say. How do you think the agreement will improve on the terms of NAFTA?

Mr. Mark Rowlinson :

NAFTA clearly did a lot for the steel industry, just as this new agreement will. Our problem is that NAFTA did little to help steelworkers. What matters to us is whether the new agreement is really going to help our workers be competitive. Even though they are competitive, will trade activity be carried out in a way that's truly fair to workers? That's what matters to us. There is no question that the steel industry fully supports this agreement. In fact, I believe you'll be hearing from its representatives shortly. I imagine the aluminum industry is also in favour of the agreement, even though it wasn't granted the same protections as the steel industry. It's clear that—

Mr. Stéphane Lauzon :

Do you agree with me that the aluminum market has taken a major step forward? Aluminum wasn't part of the negotiations, and at least 70% of aluminum will be…. I have a question for you about the aluminum sector. You said that Quebec's producers were among the best in Canada and that their quality was unparalleled. In addition, I would say that they are the greenest in Canada. How did they forge a top spot for themselves? Now, with the 70% requirement in the zone…. How will this agreement not make things better? Can you tell us whether there's been a significant improvement for aluminum, without drawing a comparison with steel?

Mr. Mark Rowlinson :

The problem is not the quality of Canadian steel. The problem is that China produces 30 times more aluminum today than it did 20 years ago. That means the aluminum market has tremendous overcapacity, and China will want to find a market for that aluminum. It will sell it much lower than the market price. We are afraid China and other countries will dump their aluminum in Mexico. Eventually, it will hurt Canadian producers.

(1645) Mr. Stéphane Lauzon :

Are you aware that the negotiations can continue?

[ English ]

The Chair :

Mr. Lauzon, you indicated that you wanted to share your time. You have a minute and a half remaining.

Mr. Stéphane Lauzon :

I'll ask a quick question. [ Translation ] The negotiations are still going to continue after the agreement is signed, and it will be possible to deal with product quality and market insurability, among other issues. I think it's important to ratify the agreement so the negotiations can continue. You know that, don't you?

Mr. Mark Rowlinson :

Yes, I'm sure that the negotiations and discussions will continue. However, I would say that we are trade unionists and that, when we negotiate collective agreements, an agreement is an agreement. Once it's signed, it signed, so I don't think many changes will be made to the agreement going forward.

[ English ]

The Chair :

You have 40 seconds remaining.

[ Translation ]

Ms. Rachel Bendayan :

I have a brief comment, if I may. The agreement already provides for a return to the bargaining table. That's in CUSMA. [ English ] Mr. Yussuff, I have very little time to ask you my questions. I see that the CLC has approximately 3.3 million workers. You represent approximately 3.3 million workers in Canada. Is that right?

Mr. Hassan Yussuff :

Yes, including our friends the steelworkers. We're all part of the same family.

Ms. Rachel Bendayan :

Yes, I can imagine. Of that family, how many workers would you say are there in Canada who rely on trade with the United States and/or Mexico? I'm only looking for an approximate number.

Mr. Hassan Yussuff :

In the manufacturing sector, and also in the resource sector, I would say we've got probably several hundred thousand members who are impacted by it, who work in industry and also in the supply chain, including agriculture. Our members actually work in many of the agriculture sectors that produce products that get exported to the United States.

Ms. Rachel Bendayan :

What—

The Chair :

I'm sorry, but the time is up. Mr. Savard-Tremblay, you have two and a half minutes.

[ Translation ]

Mr. Simon-Pierre Savard-Tremblay :

Once again, my question is for the gentlemen from the United Steelworkers. In terms of the labour

chapter improvements needed, you said the International Labour Organization conventions were preferable to the Declaration of the Rights at Work. Could you elaborate on that?

Mr. Mark Rowlinson :

Unless I'm mistaken, the three signatories to the agreement have to adhere to the 1998 declaration, which is less stringent than the International Labour Organization conventions. It is our position that the agreement should have included the conventions, in terms of both content and the jurisprudence flowing from the conventions, not just the declaration, which has been signed by nearly every country.

Mr. Simon-Pierre Savard-Tremblay :

Quickly, can you give us examples of tangible differences between the conventions and the declaration?

Mr. Mark Rowlinson :

I'm more comfortable discussing technical details in English.

Mr. Simon-Pierre Savard-Tremblay :

No problem. We have

interpretation services.

[ English ]

Mr. Mark Rowlinson :

Okay. For example, convention 87, the convention on freedom of association, incorporates a number of specific tests as to how countries need to respect workers' rights to join a trade union. In Mexico, that's the central issue. As Hassan was mentioning, and as others have mentioned, the central issue in Mexico is whether Mexican workers have the authentic right to join a free trade union. If you incorporate all of the decisions and the jurisprudence as part of that convention, and it's actually enforceable, that's a much stronger standard than simply signing up to the 1998 declaration, in our judgment.

[ Translation ]

Mr. Simon-Pierre Savard-Tremblay :

I suppose I'm out of time.

[ English ]

The Chair :

Yes, you have half a minute.

[ Translation ]

Mr. Simon-Pierre Savard-Tremblay :

Very well. That's all for now.

[ English ]

The Chair :

All right, thank you. Mr. Blaikie.

Mr. Daniel Blaikie :

Thank you very much. I just want to come back to the steel and aluminum content requirements. One of the things I certainly found interesting and somewhat shocking was that when we had Canada's lead negotiator and his team here, and we asked what percentage of North American steel and aluminum are currently in autos, they said they didn't know, that they didn't have that information. I'm wondering what work needs to be done in light of this agreement in order to make sure Canadians know whether those content requirements are being met, whether they're improving over time, whether they're worsening over time.

What kind of homework do we have to do here in Canada to make sure we're getting the promised benefit of this content requirement?

(1650) Mr. Ken Neumann :

Maybe Mark can answer some of it. The fact is that statistics show that with more vehicles being built in Mexico, they're not getting their aluminum from.... I don't know where they're sourcing their materials. I think a lot of it is from offshore. They've now surpassed Canada by more than a million cars. I think you're right that the North American content in those vehicles is something we should have at our fingertips if you're going to a GM plant or a Ford plant.

My experience has been that, because our organization uses North-American-built cars, I can tell you that it's very difficult to find a North American car with 50% North American content, and that's an issue. Mark may have something to add.

Mr. Mark Rowlinson :

I'll just add one thought, which is that in the United States they have done fairly detailed economic analysis of the employment and economic impact of this agreement. As far as I can tell, in Canada, we have not done any of those analyses, and that is disappointing to us. I appreciate that there is a desire on the part of many in this room to pass this agreement as quickly as possible, but this is an agreement that is going to fundamentally change and control the central economic relationship we have as a country for the next number of decades, if not longer.

It seems to me that we should not be rushing into this, that we should actually be doing a detailed analysis on the kinds of things you're talking about.

The Chair :

Thank you. I want to thank all our witnesses for coming and sharing valuable information. We appreciate that very much. We will suspend for the next panel to come on board and give everybody a chance to say hello to the witnesses. Five o'clock is our next panel. Thank you.

(1650) (1700) The Chair :

I'm calling the meeting back to order as we continue to do a study of Bill C-4 ,

an act to implement the agreement between Canada, the United States of America and the United Mexican States. Will our witnesses please join us at the table? With us, from the Aluminium Association of Canada, we have Jean Simard, president and chief executive officer. From the Canadian Automobile Dealers Association, we have Huw Williams, director, public affairs, and Oumar Dicko, chief economist. From the Canadian Chamber of Commerce, we have Jackie King, chief operating officer, and Mark Agnew, director, international policy. Finally, from the Canadian Steel Producers Association, we have Catherine Cobden, president. Mr. Simard, I will start with you.

Mr. Jean Simard (President and Chief Executive Officer, Aluminium Association of Canada) :

Thank you, Madam Chair. My intervention will be in sequence in both official languages, if I may. [ Translation ] I'd like to thank you for giving us the opportunity, as part of these consultations, to share the viewpoint of the industry we represent, Canada's primary aluminum industry. I'll start with a few figures. Some 8,700 people work in our nine plants producing 3.2 million tonnes of low-carbon aluminum, nearly 90% of which is exported to the United States.

Although our region-based production generates about $7 billion in exports, the activities that form our industrial fabric, ranging from research to processing, represent nearly $15 billion annually. Since we export 90% of what we produce, mainly to the United States, free trade is woven into our DNA. That is why we unconditionally support the swift ratification of the free trade agreement between Canada, the United States and Mexico.

That is also why we unconditionally supported the other two major trade deals: the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP, and the Canada-European Union Comprehensive Economic and Trade Agreement, or CETA. At a high level, the parameters that govern trade under these agreements increase the predictability needed by an industry with such highly integrated value chains as ours. Our planning and investment decisions depend on our ability to anticipate changing market needs within a stable and predictable business environment.

We believe the agreement lays the foundation for modernizing our trade relationships, by providing a framework that can lead to industry improvements in the months and years ahead, with a view to creating value for all three countries, as well as our industry, workers and host communities. Now I'd like to debunk some myths. Certain things that have been said about the agreement's repercussions on the aluminum industry are worth a closer look.

In recent weeks, comments have come to light regarding the so-called repercussions of the ultimate agreement, including job losses and the cancellation of expansions and investments. For the past decade, we've been experiencing a depressed price environment, crippled by the Chinese presence, and just recently, we endured a slew of events that disrupted our main market, the United States. Make no mistake: although it is true that projects have been scrapped in recent years, it is not accurate to claim that the outcome of CUSMA negotiations is putting jobs at risk or resulting in cancelled or delayed investments.

The postponement of expansion projects is not related to the agreement negotiations or framework agreement. The fact of the matter is that investment decisions are based on, and greatly affected by, three fundamental elements. The first is the price of the metal. Since 2008, we have been in a long stretch of depressed prices, largely caused by China's exponential growth in the market. The Chinese government subsidizes production costs, which has the effect of keeping the world price low. We are being paid a 1990 price, but we have 2020 costs, thereby reducing our margin to less than 44% of what it was in 1990.

Tariff uncertainty is the second element. That refers to tariffs on competition from countries that export to the American market. Ironically, the tariff—which makes the American market the one providing the best price for aluminum in the world—preserves market volatility because no one knows when one or more countries might be exempted, which would change the price dynamic. That's another element of uncertainty we have no control over. The third and final element is construction costs, in other words, our capital expenditures, which are four to five times higher than in China.

What's more, our construction time frames are three times longer. What takes us three years to build, China is able to build in 12 months at a quarter of the cost. When we build a single plant here, the Chinese build three and do it for cheaper.

(1705) You can see that these three basic reasons alone are enough to scrap any major project. We don't need to add any more reasons. [ English ] What are the benefits of CUSMA for the aluminum industry? In the short term, Canada and its aluminum industry benefited from a full tariff exemption, making it the sole significant primary producer in the world with unfettered access to the U.S. market. While the old NAFTA had a 62% regional value content for most parts, CUSMA takes us further ahead.

In the long term, the agreement globally increases the overall regional content for the automotive industry through increased RVC, bringing the threshold all the way up to 75% in certain cases. By naming aluminum within this context, it sends a clear signal to the automotive industry as to the importance of and expectations regarding the use of this metal. We also understand from our meetings with government officials that these multiple layers of regional content requirement thresholds for key components with significant aluminum content will incentivize OEMs towards using regionally produced metal.

We are thus far from where we were with the old NAFTA. How do we make this happen so that Canada reaps the full benefits of this agreement? Our recommendations are as follows. First, to protect free and fair trade between the three countries, we need a shared approach to metal import monitoring in order to ensure that unfairly traded aluminum does not enter the region. While Canada added aluminum products to its import control list as part of a commitment with the United States to prioritize trade monitoring and enforcement, we need Mexico to do the same.

Canada, with the United States, must ensure that Mexico adopts an import monitoring system for aluminum imports into its territory as robust as that implemented by Canada on September 1, 2019. We must maintain our unfettered access to the U.S. market and benefit from the growth in demand in the transport sector without being subject to market erosion stemming from surges in imports of unfairly subsidized Chinese aluminum. A trilateral mechanism should enable industry, alongside governments, to monitor progress toward the joint monitoring of metal and non-market behaviours from third countries.

Next, we must harmonize tariff codes with the United States and Mexico to better track flows and protect the region against unfairly traded aluminum. Finally, the integrity of our low-carbon and responsibly produced metals must be preserved through traceability as it enters the U.S. market as a CUSMA Canadian origin metal, not to be confused with others. With the help of the Quebec government, industry has been working with modern traceability tools on pilot projects tracing the metal from smelter to border.

As we conclude our pilots, the next step will require the help of the Canadian government to ensure full implementation in a timely fashion. I would like to conclude with the following, Madam Chair. (1710) [ Translation ] After Canada's ratification of CUSMA, the following months will provide an opportunity to further develop the rules for regional content, thereby sending additional signals for the realignment of value chains. We believe that this step remains crucial in order to help the automotive sector achieve the full value of CUSMA for the economy as a whole.

We'll continue to work with the government to ensure that the rules of origin benefit the entire North American value chain, including Canadian primary production, so that our low-carbon footprint aluminum contributes in innovative ways to the transformation of the North American vehicle fleet of the future. Given the current price environment, our fragile markets and the effects of the rail crisis on our operating costs, we must rely on the financial assistance and co-operation of the Canadian government if we want to fully benefit from this agreement for our employees and communities and for our shareholders.

Thank you.

[ English ]

The Chair :

Thank you very much, Mr. Simard. We'll go on to Mr. Williams from the Canadian Automobile Dealers Association.

[ Translation ]

Mr. Huw Williams (Director, Public Affairs, Canadian Automobile Dealers Association) :

Good evening. [ English ] Madam Chair, thank you for having us before the committee. I have to give you a quick shout-out for all of your decades of work on behalf of the auto industry. You've been one of the most approachable members of Parliament in terms of auto issues. I should probably give a shout-out as well to the member from Oshawa, Mr. Carrie, who's been equally accessible on automotive issues over the years. It's a pleasure to be here. I'm very pleased to be here representing the car dealers association. We have 3,200 members across the country and 160,000 employees.

We're the largest employer in the auto sector. Our employees have well-paying, stable careers in every community across Canada. As I look across the ridings that are represented here around the table, I think most of you will know your car dealers, and if you don't, you'll get to know them over the next four years. I'd like to start off by thanking the Prime Minister . I'd also like to thank the Deputy Prime Minister, Minister Freeland , and really, all MPs of all parties for the non-partisan push to get this trade deal on the table.

As we watch the activity coming out of the United States, we see that the auto sector was very much in the targets with the automotive trade tariffs. I think the work done on a non-partisan “team Canada” approach was really quite spectacular. Also, I think the Leader of the Opposition deserves a shout-out for the work he did helping promote the concerns of our sector when we raised the automotive tariffs' impact on communities. I'm just back from Toronto, where I spent time touring the auto show floor.

The Toronto international auto show, for those of you who don't know, is the largest consumer trade show in the country, dealer-owned. Minister Bains made an announcement there, and I had the opportunity to show him around the car show and work with him. Both he and Premier Ford attended the show, Premier Ford for a separate announcement on the project we're doing on jobs and youth skills training. We had conversations with both of them, which I think shows the non-partisan nature of this.

They both stressed how this is really a team Canada approach, and that we all have to be behind making sure we have good long-term relations with the U.S. and that we get these elements over the goal line. The trade deal in itself was hugely important to the auto sector. We're one of the most integrated sectors there is. In our view, if the tariffs that were threatened by the White House had been brought into place, they would have been devastating, and according to the analysis of our economics team led by Mr. Dicko, they would have cost about 120,000 jobs.

It's worth highlighting that the automotive trade between Canada and the U.S. is worth $150 billion per year. That's more than $400 million per day. It's important, again, to underline that 80% of Canada's automotive trade and production each year is destined for U.S. consumers, and Canadians each year buy a similarly large proportion of vehicles coming from the States. The seamless traffic of automotive parts—automotive manufacturing—is important not just to the parts-manufacturing sector. It's critical for dealers and consumers in this country.

We reached out to our counterparts, the National Automobile Dealers Association, during these negotiations. We made sure we talked to them directly to get them on the same page about delivering a unified message in Canada and the United States that auto tariffs are bad for consumers, bad for the economies and certainly bad for car dealers, and that we needed automotive free trade. I think it's tremendously important that every association that deals with their U.S. counterparts delivers that message on both sides of the border to put Canada first.

I'm going to turn to a little bit more negative commentary now with respect to things that we should spend some time being concerned about. The agreement is a terrific first step, but we sit on what's known as the Canadian Automotive Partnership Council, which is a committee of industry and government put together. Minister Bains is a key player in that, along with his Ontario counterpart, Minister Fedeli. This body was formed to help increase investment in Canada and for Canada to get a better share of automotive investment.

The bad news for Canada is that we've been getting only 7% of automotive investment since 2009. That's clearly not sustainable from the point of view of maintaining a competitive footprint here. We need both federal and provincial governments to really help reduce the cost structure to get these investments and build a strong base across Canada, which is pivotal to the economy. It's good for the economy, obviously, but it's good for dealers and it's good for the whole supply chain and for consumers ultimately.

(1715) I'd also like to spend a couple of minutes talking about another potential trade irritant that's on the horizon. Members will know about the proposed luxury tax on automobiles over $100,000. It's poised to affect about 1% to 1.5% of automobiles. We've negotiated one free trade agreement and we've negotiated another free trade agreement with the Europeans. This particular proposed tax has the potential to disrupt trade with the Europeans. Ninety per cent of the vehicles targeted by this are from European destinations, and it really contradicts the spirit of free trade with those countries.

This really isn't a theoretical example. Australia and the European Union are struggling over this very point of a special tax imposed in Australia. I would also point out that the biggest problem with these taxes is that they don't work. The U.S. tried a luxury tax whereby they imposed a luxury tax on vehicles over $100,000, on boats, planes and automobiles, and it had to be repealed by the Clinton administration in the nineties because people either buy around it or hold off on their purchases or make different purchases, so it doesn't raise revenue. In Canada we have the perfect example, which I'm sure Mr.

Dicko would be glad to answer questions about. The provincial luxury tax in British Columbia has added another 20% on top of the purchase price of vehicles. We've seen a sharp decline in luxury sales in that province because people just hold off, don't buy or buy elsewhere. We've also seen job losses reported in that province. We're on a downtrend in terms of overall sales in the car industry, so it's just not the time to make that happen. In conclusion, I would like to say thank you again to this committee for having us in.

My appreciation goes to the last Parliament, and of course this Parliament, for all the hard work in getting this deal in what was a very difficult circumstance. Thank you, Madam Chair.

The Chair :

Thank you very much, Mr. Williams. We'll move on to Ms. King from the Canadian Chamber of Commerce.

(1720) Ms. Jackie King (Chief Operating Officer, Canadian Chamber of Commerce) :

Madam Chair, thank you for the invitation to appear before the committee today regarding the CUSMA implementing legislation. Given the critical importance of this agreement for Canadian businesses, I'm really delighted to be here. I'm joined by my colleague Mark Agnew, who leads our international trade work. The members of the committee will certainly be familiar with local chambers of commerce in their communities. At the national level, the Canadian Chamber of Commerce represents over 200,000 businesses in all sectors and all regions of the country.

Our membership encompasses not only chambers of commerce but also sectoral associations and companies, including everything from small to large multinational organizations. The Canadian Chamber of Commerce was actively engaged throughout the CUSMA negotiations. We attended the negotiating rounds and mobilized our network of chambers, associations and companies through our “keep trade free” coalition. We also work closely with our counterpart business associations in the United States and Mexico.

With respect to the legislation currently before the committee, this trade agreement and its associated implementing legislation are critical for the Canadian economy. North America is, and will remain, our most important trade and investment partner. Businesses across the country have suffered from significant disruptive uncertainty since President Trump came to office. Although the CUSMA is not a panacea for the erratic trade policies emanating from the White House, it is crucial that we turn the page and lock in the new arrangement to provide certainty for our Canadian companies.

It's in that spirit that we urge the expeditious passage of Bill C-4 . Every trade agreement involves trade-offs, and no agreement is perfect. However, our trade negotiators did an extremely commendable job with their efforts, during a very difficult set of circumstances, to deliver the agreement that is now before Parliament for consideration. Now I'll highlight some of the particular benefits of CUSMA, from our perspective. Foremost is maintaining the original NAFTA's benefits with respect to tariff-free market access for goods, given the volume of cross-border trade.

The importance of the certainty this provides has been underscored by media reports earlier this month, stating that the U.S. is considering raising its WTO bound tariff rates. CUSMA's goods market access has been complemented by customs and trade facilitation provisions to help ensure that products can move more easily across borders. Shifting to the services sector, the retention of the labour mobility provisions from the original NAFTA will help to ensure that companies are able to attract the best talent.

While we certainly had hoped to expand the list of covered sectors, enhanced labour mobility under the U.S. administration was realistically a bridge too far. We also welcome the inclusion of digital trade provisions, which will help play a key role in setting global standards on issues such as cross-border data flows. More specifically, these types of provisions are helping to shape the ongoing WTO e-commerce negotiations. Crucially, CUSMA preserves the NAFTA's dispute settlement provisions for anti-dumping and countervailing duty cases, and strengthens the panel process for state-to-state disputes.

Last, the side letters on

section 232 measures provide a degree of protection for Canadian exporters. However, we cannot afford to be complacent under either this or a future U.S. administration. As I noted a moment ago, the chamber gives its full endorsement to the passage of Bill C-4 , and Canada completing its CUSMA ratification process in a timely manner. However, the clear message is that we do not want to see this process as the end of the road when it comes to ensuring Canadian businesses remain competitive while attempting to access opportunities in the North American market.

A perennial concern for us is buy America provisions at the federal and state levels, which attaches conditions to require the use of American-manufactured products. This considerably limits the ability of Canadian firms to participate in many U.S. infrastructure projects, and more specifically, the ability of Canadian companies to use their Canadian-based operations to participate in those contracts. The prevalence of buy America provisions risks creating incentives for companies to move manufacturing jobs to the United States.

Unlike NAFTA, CUSMA does not cover U.S.-Canada procurement, and there is a risk—we understand from the media reporting—that the Trump administration may withdraw the United States from the WTO GPA.

(1725) Another concern is softwood lumber. Canada's softwood lumber industry remains in a challenging period due to a range of factors including market access and issues with the U.S. The government should continue its efforts to reach a resolution in the softwood lumber dispute in collaboration with our exporting companies. Finally, regulatory barriers and border frictions continue to create problems for Canadian companies seeking access to the U.S.

With the CUSMA negotiations now concluded it is important for the government to ensure the regulatory co-operation council works in partnership with industry-led initiatives such as the Beyond Preclearance Coalition. These types of initiatives may not provide a photo opportunity but they are absolutely critical for companies that move goods across the border. While these three issues are not ones that we expect to be resolved in CUSMA negotiations, they are crucial to our members and should be priorities for the government now that the CUSMA negotiations are concluded.

However, as I mentioned at the outset, we urge the committee to move ahead with its study as expeditiously as possible so that we can complete our domestic ratification procedures and refocus our energy on these outstanding issues. Thank you, once again, for the opportunity to appear before this committee. I look forward to your questions.

The Chair :

Thank you very much, Ms. King. We'll move on to the Canadian Steel Producers Association with Ms. Cobden.

Ms. Catherine Cobden (President, Canadian Steel Producers Association) :

Thank you, Madam Chair and members of the committee. Thank you very much for the opportunity to be here today. My name is Catherine Cobden. I'm the president of the Canadian Steel Producers Association and it's my honour to share the perspectives of our members on Bill C-4 ,

an act to implement the agreement between Canada, the United States and Mexico. I'm here today representing member companies, which produce approximately 15 million tonnes of steel pipe and tubular products annually and support 123,000 direct and indirect jobs in five provinces, from Saskatchewan through to Quebec. Canada's steel sector plays a strategically important role in the North American economy. We are advanced manufacturers of 100% recyclable and enduring product.

We are a critical supplier to other key Canadian and North American sectors, including the automotive, energy and construction sectors and many other general manufacturing applications. We're also a sector that knows first-hand how critical it is for our business success to have strong and productive relationships between Canada and the United States and Mexico. We operate in a highly integrated marketplace with steel moving back and forth across the Canada, U.S. and Mexico borders as it is transformed into additional products. In this capacity, we thank you all for this agreement and we welcome it wholly.

We urge all members of the House of Commons and the Senate to support this bill and ratify it without delay. We see immediate advantages of the new agreement that strengthen NAFTA in several important ways both for our country and certainly for our steel sector. The agreement also creates more certainty in our markets, a much needed and necessary condition for driving increased investment. Now let me step you through some of the key advantages for steel that we see in this new agreement. First, the automotive rules of origin incentivize the use of Canadian and North American steel.

This means that more North American steel will be used over foreign, non-North American steel. It sounds obvious but it deserves to be said. The new requirement for a 70% North American steel content is a significant gain for the North American steel sector. NAFTA did not have any such provision, so that's a significant development. Today the North American automotive sector is a valued customer for our technically advanced and high-quality steel, with approximately 25% to 30% of all Canadian steel supplying this sector. That equates to about three million to four million tonnes annually.

This is an extremely important development for us and for our steel industry colleagues in the U.S. and Mexico. Indeed, we were quite engaged working together on this and other aspects of this agreement. Furthermore, the increased North American value content requirements for vehicles and vehicle parts are also important and improve the original NAFTA agreement significantly. As Jean has already mentioned, in some cases it has moved the content requirement from 62% to roughly 75%, which is a tremendous increase. In the case of steel, we also welcome additional

definitions coming into effect in seven years' time that strengthen the rules of origin by ensuring North American sourcing. This is important for our sector. We face severe global overcapacity. It's severe. The OECD estimates that approximately 440 million tonnes of excess capacity exists globally. This excess capacity equates to about 30 times the entire Canadian production. That's steel out there that's looking for a home, that's trying to cross both the Canadian and the North American borders.

Beyond the rules of origin, I want to point out that the new agreement also improves market access for Canadian steel and allows the use of effective trade remedies against unfairly traded imports. That overcapacity, which I mentioned, often results in unfair and injurious trade practices. The new agreement contains important provisions that will promote increased co-operation and information sharing between North American governments to address circumvention and the evasion of trade remedy orders. This is critical for us.

This increased co-operation is essential for the North American steel marketplace because we face a relentless flow of unfairly traded goods due to the global overcapacity I mentioned.

(1730) I remind the committee that last May we celebrated the establishment of the Canada-U.S. understanding on trade that resulted in the lifting of the very damaging tariffs on Canadian steel. This did not come easily to our nation, but it came as we worked as one against the difficult tariff situation.

For us, CUSMA takes us further along the path of working with our North American trading partners on what we refer to as the principle of a North American perimeter to trade that strengthens the competitiveness of the North American region, that addresses global steel overcapacity and that aims to deal more readily with unfairly traded steel imports. Madam Chair, please let me end with a call to all, once again, to come together as team Canada, as you have deftly done in the past, and get this deal done as quickly as possible, with my thanks. I'm happy to take questions.

The Chair :

Thank you very much, Ms. Cobden. We'll go on to Mr. Lewis.

Mr. Chris Lewis (Essex, CPC) :

Thank you, Madam Chair. Thank you very much to the panel, the witnesses, for coming here this evening. We certainly appreciate it. All the input we can get will help us to get this moved along in a very timely manner. I know our side certainly wants to get it ratified. The first question I have I did bring up earlier, but I really think it's important to ask both Mr. Williams and Ms. King. It's with regard to CUSMA, specifically with regard to the implementation side of CUSMA. I too was at the Toronto auto show last week, which was quite amazing, to say the least.

I went there on behalf of my riding, of course, but also in my capacity as chair of our auto caucus committee. Of course, my riding is a place called Essex, which is right next to Windsor, so I have a lot of reasons to have a very keen interest in that. My question again is specifically to both of you, please. I'm hearing from industry representatives that while they support ratification, there are concerns about the implementation, particularly the very short 90-day transition period between ratification and implementation.

Can you briefly explain, first, the changes for your sector under the new NAFTA and, second, any concerns your sector has about the implementation issues on day one?

Mr. Huw Williams :

Ladies first, Catherine.

Ms. Catherine Cobden :

Are you calling on me? I didn't think it was for me.

Mr. Chris Lewis :

No, I was asking Ms. King, please.

Ms. Jackie King :

Mark, maybe I'll turn it over to you. You've been dealing with that quite closely.

Mr. Mark Agnew (Director, International Policy, Canadian Chamber of Commerce) :

Certainly what we've heard from our members is that it's a very tight time frame. I don't think anyone would dispute that it's something they're quite mindful of. Certainly, to take the overlay of the NAFTA changes plus CBSA having a number of programs it's implementing on the IT side from a user interface perspective, I think companies are quite mindful of navigating through that.

The rules of origin changes, I think, are probably the most totemic that companies are thinking about, both from the OEM perspective and of course we have the steel producers and aluminum producers as well and how they fit into that equation, too. Last, there are some issues around the customs and trade facilitation provisions. The de minimis threshold will be increasing as part of the CUSMA. Of course, we're going to be now moving to a bifurcated scheme, where the de minimis levels for both the sales tax side and the tariffs side will now be split,

whereas before they had been harmonized at the same level.

(1735) Mr. Chris Lewis :

Thank you. Mr. Williams.

Mr. Huw Williams :

I'll take a slightly different tack at that. I think that for the car dealers the most important thing was that, as soon as the White House came up with the threat of 25% auto tariffs, I mean, that was “carmageddon”, potentially, for car dealers. Literally the impact of that would have been catastrophic on both sides of the border. It was a threat that we took very seriously. Having the deal in place and getting rid of the potential side tariffs in the automotive side letter was a huge part of that in terms of relief. That took the pressure off.

It's now over to the OEMs to work those details out with steel producers and aluminum producers. We know, just from conversations with them, that those efforts are ongoing, but that's not really in our sector.

Mr. Chris Lewis :

Thank you. Do I have time for one more question, Madam Chair, or am I out?

The Chair :

Yes, you have two minutes.

Mr. Chris Lewis :

Thank you very much. This question is for Monsieur Simard. If I understood, I believe that your association is in support of CUSMA. Because you have indicated that you support this deal, I guess one troubling aspect of this deal is that aluminum was not offered the same provision as steel, as you well know. That is the provision that, in order for it to be North American, the steel would have to be smelted and poured in one of three North American signatures. Mexico has no smelting capacity for aluminum.

We've been told that, without this provision, imported aluminum that is unfairly subsidized and/or sold at bargain prices from countries like China may be dumped into the Canadian market. Can you explain your support and what your association intends to do to ensure that this sector receives the support it needs from the Canadian government to ensure that you are not competing at a disadvantage?

Mr. Jean Simard :

We have expressed our disappointment to that effect. We think we have to build from here on the basis provided by the USMCA global agreement and its protocol. We are asking the Canadian government to ensure, first of all, that Mexico sets in place a robust import control monitoring system, as Canada has provided as of September 1 of last year. Basically of the three countries that have agreed in their May 17 joint statement with the United States to set up such a monitoring system, only Canada has delivered the goods.

I certainly salute Madam Freeland under her former responsibility and her department, which was able to come up with such a system within two months prior to the election. Canada is the only country right now that has a system like this. We have asked the Canadian government to export that expertise to the U.S. and Mexico. We understand that in the budget announced by the White House a few days ago, somewhere hidden in the thousands and thousands of pages, is a line item to provide funding for setting up such a system within the commerce department. The U.S. is engaged with Canada to get Mexico to follow suit.

That's one part of the equation. The other part of the equation is the need to have a joint approach to monitoring the transit of metal. When you look at CUSMA, you look at a trading space where Canada is the only significant primary metal producer. The U.S. is the big market, not only for North America but for the whole world. Everybody is shipping to the U.S. because it's the highest net back. It's the highest price paid for aluminum in the world. The pressure is very strong to access this market, and as much as possible, to access it through either Canada or Mexico, which are duty free.

Mexico is the easy way in. Why? Because they're a buyer. They buy scrap from the U.S. and they buy billet from whatever the world wants to offer at the lowest price possible. They have been known—and it is documented—to let metal come in that has been rejected in the U.S., such as wheels most likely, that have been under a

section 301 measure in the U.S. The same wheels have found their way into the continent through Mexico. We're talking about big numbers here. We want administrations to ensure that no illegally traded metal finds its way in. We don't mind about competition on a level playing field. We do mind about illegal competition.

(1740) Mr. Chris Lewis :

Thank you very much for that long two minutes.

The Chair :

It was because I thought the information was critically important, I let you go on. Mr. Lauzon.

[ Translation ]

Mr. Stéphane Lauzon :

Thank you, Madam Chair. I was very pleased to hear Mr. Simard talk about the quality of the steel, but my question is more for you, Mr. Williams. In the design of your vehicles, you must comply with fairly strict standards and rules. I come from the aluminum and steel industry. In its plans and specifications, this sector must meet quality standards. Do you focus on quality? China will be dumping aluminum, and we often hear that it may be of poor quality. What quality standards do you need to meet in aluminum production?

[ English ]

Mr. Huw Williams :

I appreciate the question. I'll let Mr. Dicko respond in French in just a second. As a global commentary, the responsibility of ensuring the quality of the vehicles and the quality of the aluminum falls on the manufacturers. We represent the dealers in your riding. As franchise members, a lot of people don't understand that the individual dealers in each community buy the vehicles from the factories. They have the full range of responsibility for making sure those products meet the level of quality for international trade agreements or for safety or anything along those lines.

[ Translation ]

Mr. Oumar Dicko (Chief Economist, Canadian Automobile Dealers Association) :

Thank you for the question. We care about the quality of the products used in what we sell. As Mr. Williams just said, the manufacturers must ensure that the steel and aluminum products that they use comply with the standards, in order to provide good quality products on the Canadian market.

Mr. Stéphane Lauzon :

You can respond as well, Mr. Simard.

Mr. Jean Simard :

Thank you. Suppliers that sell aluminum to automakers must obtain certification for their product. If they stop delivering their product because of a labour dispute, as has already been the case, and they're unable to serve their customers for a year, they must obtain certification again. This cycle takes time, and it takes several months for them to be able to keep up with orders. It's very demanding.

Mr. Stéphane Lauzon :

Mr. Simard, do you agree that the aluminum produced by Quebec or Canada is of high quality and is well-known in the automotive industry? This constitutes an opening of the market to continue negotiations and move forward. You spoke earlier about something significant. We haven't built a plant in several years because of globalization and construction costs. Those are the two main reasons that you provided. You gave better explanations than I did, but that's the gist of it. Don't you think that the signature of the new agreements could provide better outlets and foster the development of the aluminum industry in Quebec and Canada?

Mr. Jean Simard :

The decisions to invest in projects that cost millions of dollars are based on basic market factors, some of which I listed earlier. There's the price signal and the cost curve in relation to the competition. As long as the price of metal in the market hasn't fallen...The current price is between $1,600 and $1,700 per tonne. At $1,700 per tonne, about 10% of the global capacity is in the red, and at $1,600, that figure is 40%. No one will invest a single dime in projects, except in China, where they're giving out subsidies like candy to increase capacity and production.

Mr. Stéphane Lauzon :

You gave a good explanation of the Chinese market. However, here in Canada, nothing in the agreement has prevented us or will prevent us from building plants. It has nothing to do with that.

Mr. Jean Simard :

Absolutely.

Mr. Stéphane Lauzon :

Okay. I have a question for Ms. Cobden. Steel companies have made large investments. How can the industry ensure that employees benefit financially from the investments? The jobs are fairly high paying positions. How can these agreements provide better conditions for our workers?

(1745) [ English ]

Ms. Catherine Cobden :

As I've mapped out, the agreement does a number of things that drive demand, which is fantastic in terms of North American steel, not just Canadian steel. The agreement also does another thing. We were just talking about investments and the point I wanted to add into the conversation was that the agreement adds a level of certainty that we haven't seen in a while. Certainly in the steel and aluminum tariffs' situation, you understand the challenges we face around certainty.

The agreement really moves us forward in terms of having certainty, which then drives investments, which then drives growth, which then supports the ongoing, strong middle-class jobs that we create in the steel industry in this country. Everything builds off the others. Certainly at the time of the tariffs we were losing investments like crazy, and that's where the support of the government was so critical to maintain that, probably not sufficiently, but we did the best we could to maintain a certain level of movement forward. Some of those investments translated to great production increases.

Some of the quality issues you mentioned, etc. Now this agreement takes us forward, especially in terms of the items I've identified and the business certainty that it creates. From my perspective I think that's the most important thing it does. I hope that addresses your question.

Mr. Stéphane Lauzon :

That's good.

The Chair :

Thank you very much, Mr. Lauzon. Mr. Savard-Tremblay.

[ Translation ]

Mr. Simon-Pierre Savard-Tremblay :

Thank you, Madam Chair. I want to thank the witnesses for joining us. Your points of view are valuable. I have a hypothetical question for Mr. Simard. Would it have been good to obtain, under CUSMA, the same protection for both al